Appraisal Practices Defended and Blamed

In early March, we decided to refinance our 2-year-old home, not only to capitalize on low interest rates, but also to finance remodeling. We knew that the value of our house had increased substantially.

The mortgage broker required that we pay for two appraisals, at $350 each. The first appraisal came back only $50,000 above what we had paid for the home, even though the appraiser knew that we had made more than $50,000 in permanent improvements.

My wife called local brokers and title companies to obtain information on recent closings of homes in the area that were comparable to our home. In the meantime, the second appraisal came in at more than $75,000 above the first appraiser's figure. But the lender would only consider the lower appraisal. We sent the information to the first appraiser and asked him to re-work his appraisal.

The "re-working" took time, and the interest rates went up, just as we had feared. By the time the lender had approved this fixed-rate refinance package, the rate was only 0.5% below the rate we had on our current first mortgage. Clearly, we could not justify closing the loan, even though we had paid nearly $1,000 for appraisal and brokerage fees.

We have since changed our refinancing plans to include a variable-rate mortgage, because fixed rates may not drop back to their recent low levels in the near future.

So, while the mortgage broker and lender have been amply protected by these particular appraisers, we, the borrowers, have been harmed by their incompetence.